16. Consideration paid for amount of the consideration.paid for a company's assets may be (1) a fixed sum, (2) a sum to be determined by an appraisal of the property to be sold, or (3) a sum con sisting partly of a stipulated amount and partly of an amount determined by an appraisal of part of the assets. The third method is sometimes employed to solve the difficult question of determining the value' of good-will, trade-marks and other intangible assets, for which a lump sum is agreed to be paid. The amount to be paid for the tangibles is often fixed by an expert appraisal. Usually the agreement of,sale prescribes in detail the manner in which the appraisal shall be made.
17. Advantages and disadvantages of there are differences which the lawyer would consider invortant between fusion by consolidation and by sale of assets, the two processes are similar in effect and therefore the advantages and disadvantages of' one are substantially the same as the advantages and disadvantages of the other. A great advantage of the sale, however, is that only the stockholders of one corporation, the selling company, need be consulted by the directors. Tt is easier, therefore, for a large corporation to absorb a small corporation by buying its assets than by consolidating with it.
18. Intercorporate relations formed by lease.—In the railroad and public utility field, more than in the industrial field,companies have been brought together by the lease. A lease is a transfer of possession and use, and is to be distinguished from a sale which in cludes a transfer of title. The consideration for a sale is usually a lump sum ; the consideration for a lease is usually a number of sums, each called an in stalment of rent. Where neither title nor possession is transferred, but rather the right to use assets, the transaction is called a license. Thus in the railroad business we find railroads using each other's tracks under so-called trackage contracts or traffic agree ments and paying for the right in proportion to the use that is made of it. These payments are called traffic balances.
19. Who can give a lease of corporate assets?—In the absence of a statute to the contrary, the unanimous consent of the stockholders is necessary to grant a lease of corporate assets except when such action is taken as a step in the liquidation of a company, in which ease the majority of the stockholders may agree to lease for a reasonable time. Under modern statutes, leases may be given by a vote of two-thirds or three fourths of the stock. Leases of public service prop
erties are generally subject to the approval of public utility commissions.
20. Form of lease.—A lease of property begins with a description of the parties, lessor and lessee; this is followed by the statement that the property is con veyed, the grant or granting clause; then comes a de scription of tbe property, which may be contained in the lease in detail or in general only. In the latter case the description is usually supplemented by a schedule or inventory contained in a separate in strument. Then 'follows a clause with the object of limiting the grant. The next clause is the term, a statement of the commencement and duration of the lease. The last formal clause prescribes the amount, marmer and time of payment of rent. Then follow the covenants, most of which are agreements on the part of the lessee or tenant company to maintain the property.
21. Consideration, for when a com pany leases its property it maintains only a nominal existence. It surrenders all its property to the lessee. Thus the lease of the West End Street Railway Com pany to the Boston Elevated Railway Company transferred not only the ordinary operating proper ties of the former company, but its "materials and supplies and cash on hand at the inception of this lease, and all accounts and notes receivable, easements, privileges and appurtenances thereto belonging, to gether with the right to demand and receive all tolls, rent, revenue, income and profits of the demised premises." All expenses of the leasing company such as ordinary franchise taxes, interest on bonds and salaries of officers are met by the lessee. They consti tute part of the rent. The tenant even agrees to fur nish "sufficient and suitable offices" with "appropriate furniture and fittings" in which the officers of the landlord can meet. And finally the tenant agrees to pay dividends to the landlord's stockholders. Fre quently the dividends are stipulated in the lease, but in some cases the rate is made to depend on the earn ings of the property. Where the rate varies with the earnings, knotty problems of accounting are fre quently met the chief of which involves the question whether certain expenditures should be charged to operating expenses or to the capital account. While the flat rate avoids these difficulties, it may work hard ship in the distant future if, thru circumstances be yond the control of the tenant, the property ceases to make fair earnings.